Tag: digital companies

One of India’s top fund managers wants listed new age companies to learn this from their older peers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The unicorn initial public offering (IPO) boom has been a mixed bag with some stocks giving super normal profits to the investors and some making history with their stock market punishment on listing day debut itself! So it’s clear that one needs to cherry-pick and can’t paint the entire space with the same brush.

In an interview with CNBC-TV18, S Naren, ED and CIO of ICICI Prudential AMC said that the new age theme is set to dominate the stock market in the coming years, with many more IPOs expected to hit the market. However, he also said that private equity and venture capital firms have become cautious about IPOs due to the absurd valuations that many companies have been commanding. In recent years, some IPOs have failed to live up to expectations, causing disappointment among investors and causing valuations to fall.

He said, “I am hoping that private equity and venture capital firms, which own them, will come at a good valuation because they have realized that there is no way they will be able to come at absurd valuations and the global environment for growth stocks is not what it was in 2021. And many of the private equity firms do need exits at this point in time. So, I am hoping that they will come at an attractive valuation.”

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One of the challenges facing new-age companies is corporate governance. Naren pointed out that many of these companies have already made mistakes in this area, which has resulted in negative publicity and loss of investor confidence. He stressed that new age companies have a lot to learn from older, more established listed companies when it comes to corporate governance.

Despite these challenges, Naren said the new age space is an interesting one for investors. He believes that there is a lot for these companies to learn, and that they have the potential to achieve great things in the future. However, he also warned that investors need to be cautious and carefully evaluate the risks involved before investing in new-age companies.

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Talking about the recent derating of new age stocks, he said that it has made this pack even more interesting for investors. He said this was an opportunity to buy good companies at attractive valuations, which could potentially generate high returns in the long run.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Market behaviour slightly worrying, says Aberdeen Investment; bets on IT, tech cos

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Aberdeen Standard Investments has been a longtime India investor and has seen many cycles. 

Hugh Young, the company’s Asia Pacific Region managing director, said the Indian equity market has surprised all with ups and downs but markets are always a bit like that as they never do exactly what one predicts, except with perfect hindsight.

According to him, it has been a good year and Aberdeen Standard Investments has continued to like India simply because of the quality of the companies in the country, along with the overall long-term growth prospects. He, however, specified that it is really the firms that attract his company, and added that the environment has become exciting over the last year.

“Historically, our portfolio has been full of the older names — some super companies, the HDFCs, Hindustan, Unilever, Kotak, Asian Paints etc. Those are all in the top 10 of our India fund and our overall Indian exposure,” he said. 

Young further said this year has seen several new companies come to market and it was nice seeing the market refresh itself. He also pointed to new issues and a bit of overheating due to which expecting some pullback is only natural and in fact healthy, he told CNBC-TV18.

“It has been an interesting ride in the Indian equity market in the last year and it has been a rank performer for the past several months. Between last Diwali and now, the Nifty is up about 40 percent and the midcap index is up 42 percent and all this has been great for the retail investors who are rejoicing,” he explained.

Therefore, the current correction seen in the market is good because the market should not go up in a straight line and it is a worry now how strong the market has been, he added.

Young further said Aberdeen Standard Investments does not make big market calls but the higher something goes inevitably, it becomes slightly cautious on that because it likes buying things as cheaply as possible. However, he assured that his company is not unduly concerned with regards to their long-term holdings in the Indian equity market because the companies are in a good shape still. Pullbacks are inevitable, he said.

“What is worrying a bit in the marketplace is the sign of inflation. We are seeing signs of costs rising as seen with Asian Paints, their quarterly costs rising 25 percent or so on a year-on-year basis. And similar warnings from HUL’s and Nestlé’s in India. So certainly there are signs of inflation ticking up which is a bit worrying,” he said. 

He added that one suspects that a few companies with their next earnings announcements will fall a little short, which will cause a shift in share prices to pull back a bit. However, that would be an opportunity to buy.

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“So nothing that we have seen as yet to prompt wholesale exiting from India, but understandably a little caution — things that have run ahead a lot, maybe will take a bit off the top-off but retain we retain our long term exposure,” he stated.

When asked about the IT upcycle, he said Infosys and TCS are still very much in the company’s top 10 Indian holdings and that they have been spreading out its exposure into the pure digital area.

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Some of the internet companies like IndiaMART have also started coming in, Young said and added that in the previous years, his firm was pretty starved of everything other than Infosys and TCS and the likes. “Now, there is opportunity to invest in other areas of the technology sector that are arguably a bit more exciting with a bit more growth than the big giants like Infosys,” he said.

On new age tech companies, he said, Aberdeen Standard Investments has invested in Zomato, Nykaa, and Nazara Technologies. However, this doesn’t mean that Infosys and TCS aren’t still good investments, he said, adding that now there are few complementary investments, arguably growing at higher rates although expensively valued, which is the risk.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Digital companies may enter Nifty soon: UBS

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Thanks to the pandemic-induced lockdowns which have spurred the adoption of digital platforms, some internet-based companies are expected to enter equity benchmark Nifty over the next few months, according to a foreign brokerage. The country has created around 20 unicorns this year so far, taking the overall number of large startups with over USD 1 billion valuations to more than 60 now.

Some large startups have already gone public, while others are looking to list on the bourses as well. Food delivery platform Zomato completed its Rs 9,300-crore public issue last month. Financial services platform Paytm is awaiting Sebi nod for a Rs 16,600 crore issue, the largest IPO in the country till date, while ride-hailing app Ola too is looking to raise around Rs 10,000 crore through an initial share sale.

E-commerce giant Flipkart, online education behemoth Byju’s and hotel aggregator Oyo, among others, are likely to join the IPO bandwagon over the next 12-18 months. Also, comparatively smaller ones like PolicyBazaar, Nykaa and Mobikwik too have filed IPO papers with the market watchdog.

Some of the large new-age companies going public are likely to get into the Nifty over the next few months due to their higher market capitalisation, Navin Killa, managing director and head of Asia telecoms, media and internet at UBS Global Research, said on Monday in a conference call. There is a strong likelihood that the weighting of the new technology-based companies in the market capitalisation will keep growing from today’s very low levels and may even close the gap with China and the US, he added.

Looking at the weighting of internet companies in the overall market capitalisation, in China, it is 45 percent and in the US it is around 30 percent. On the contrary in India, it is below 10 percent (USD 3.37 trillion or Rs 247 lakh crore market cap) and hence a big opportunity to correct the gap, he said.

Citing an earlier UBS report, Killa said the domestic digital market (excluding digital payments) is set to treble USD 400 billion by 2025, from about USD 130 billion now. The biggest driver of this fast-paced growth will be e-commerce, which will reach USD 150 billion by then and segments like food delivery, online ticketing and entertainment each commanding a USD 25 billion market opportunity.

Meanwhile, Sunil Tirumalai, equity strategist at UBS Securities India, said the market is too overvalued and set to correct in the near and medium-term. The UBS house view for the Nifty is 16,000 over the next 12 months, he said, adding the index has run up quite fast.

The Swiss brokerage does not have a view on the Sensex. Since the market has performed really strongly despite not so good earnings, which are lower than other emerging markets, there can be some period of consolidation. Most foreign portfolio investors are finding other markets at better valuation with better growth and earnings prospects, he explained.

He further said globally and also domestically, the markets face many risks such as inflation, which though by and large is quite transitory. Also, new COVID-19 variants pose bigger threats to the markets and one should not rule out the risks from the pandemic for two years at least, he added. Apart from these, the domestic markets face larger risks from the many key state elections, as ahead of those the government may choose populous measures at the cost of the economy, he pointed out.

Besides, more savings are going away from the markets into consumption as the lockdowns ease. After pumping in record amounts last year, foreign investors are leaving the domestic market now due to very high valuation, he added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

New-age tech stocks: Wall Street lessons for the nacent Indian market

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Over the last several months, there has been a lot of focus on the opportunity that global stocks offer and how it is becoming easier for Indian investors to be able to invest in global companies. New-age tech or digital businesses in the listed space in India are a fairly recent addition, with many new ones lined up to go public. But globally, they have been the dominant drivers of equity indices in the US and elsewhere.

Internet companies – local versus global

On comparing Indian internet companies versus their global counterparts, Sudheer Guntupalli, lead analyst-technology sector at ICICI Securities, said, “It is a good debate. Let me highlight 3-4 points. When you are making those comparisons, it is good to keep in mind certain critical pointers. First and foremost, you should understand at what stage of evolution each of these companies are in. Depending on that, obviously, growth rates, margins, PE multiples, PAT margins, everything will look different.”

Another point to keep in mind is that COVID had a differential impact on different internet companies.

“The impact is not symmetric across different types of companies. Let us say some companies like Amazon and Facebook had seen a very strong increase in user engagement, acceleration in growth, so on and so forth over the last one and a half years. Going forward, they are expecting those growth rates to decelerate. On the contrary, if you want to contrast it with, let us say, some of the Indian companies like Zomato, because of the more stringent lockdowns, more severe restrictions, etc., these companies had actually seen a decline in revenue in the last one year, and they expect a very sharp rebound, going forward. So that is the second differential that we should keep in mind.”

The regulatory aspect also is a huge difference.

“If you look at the Indian regulatory paradigm around internet companies, we would believe that it is one of the most conducive across the globe. We have seen what happened with Chinese internet companies, and even outside China, even in developed countries like the US and UK, there has been strict regulatory scrutiny around most of these tech companies, which is not the case in India. In India, we have a very open and free market. So these are the three differences that we should keep in mind when we are doing this comparison,” he mentioned.

But is comparing Zomato with Alphabet or Facebook make too much sense in terms of comparing valuations, or growth rates? According to Rajeev Thakkar, CIO & director at PPFAS Mutual Fund, no.

“They are in different segments. The vintage of the companies are different. Some of these companies started long back and they have established business models. So one has to keep that in mind.”

“The important thing for an Indian investor who is looking to invest in internet businesses is that one should keep in mind that it is early days yet. So, while the base is low and the growth rates look very, very good, it is still an evolving space. To some extent, I am not as sanguine as Sudhir in terms of the regulatory aspect, because in my mind that is a developing space too. So we have seen the anti-trust investigations against the likes of Amazon and Flipkart in India,” Thakkar explained.

Watch Prashant Nair’s video for the in-depth analytical report

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow